Assume a Malaysian MNC is considering a greenfield investment in a foreign country. Your can choose any suitable foreign country for this project. The project is expected to cost MYR100 million and would generate local currency cash flows in the country it is operating equivalent to 20% of the project cost in the first year. The cash flows are expected to increase 20% annually over the next four years. At the end of Year 5, the project could be sold for 20% of initial cost. Additionally, the project is expected to have negative impact on the MNCs domestic cash flows due to lost exports from a competing older product line. The negative impact is estimated to be MYR2 million per annum until the project is sold. Any remittances to the outside world, including terminal sale proceeds from the project, would attract a 20% withholding tax. For this type of investment, your company would expect a minimum return of 12% per annum.

Calculate the NPV and IRR of this investment from the projects viewpoint and the parents viewpoint. Should the company invest in this project? Why or why not? What would be the impact on your answer if there is no withholding tax? Points to note: This greenfield investment will lead to the setting up of a new company which is a foreign subsidiary of the Malaysian MNC. This subsidiary generates local currency cash flows where it operates. That means you will need to put the subsidiarys cash flows in the local currency where they are operating, and not in MYR. You can choose any foreign country you want to locate the subsidiary in and use the spot exchange rate within the month of December 2021/January 2022. The exchange rate can change over the years and you will need to explain how you calculated the future exchange rates and the information you referred to.

Assume a Malaysian MNC is considering a 'greenfield' investment in a foreign country. Your group can choose any suitable foreign country for this project. The project is expected to cost MYR100 million and would generate local currency cash flows in the country it is operating equivalent to 20% of the project cost in the first year. The cash flows are expected to increase 20% annually over the next four years. At the end of Year 5, the project could be sold for 20% of initial cost. Additionally, the project is expected to have negative impact on the MNC's domestic cash flows due to lost exports from a competing older product line. The negative impact is estimated to be MYR2 million per annum until the project is sold. Any remittances to the outside world, including terminal sale proceeds from the project, would attract a 20% withholding tax. For this type of investment, your company would expect a minimum return of 12% per annum. 1 Calculate the NPV and IRR of this investment from the project's viewpoint and the parent's viewpoint. Should the company invest in this project? Why or why not? What would be the impact on your answer if there is no withholding tax? Points to note: This greenfield investment will lead to the setting up of a new company which is a foreign subsidiary of the Malaysian MNC. This subsidiary generates local currency cash flows where it operates. That means you will need to put the subsidiary's cash flows in the local currency where they are operating, and not in MYR. You can choose any foreign country you want to locate the subsidiary in and use the spot exchange rate within the month of December 2021/January 2022. The exchange rate can change over the years and you will need to explain how you calculated the future exchange rates and the information you referred to